Headlines sizzled recently with the news that mega-wealthy couple Bill and Melinda Gates plan to divorce. Family law attorney Carolyn Grimes weighs in on some of the legal issues and questions the high-profile split raises.
Did the Gates’ have a prenup?
No, we know there is no prenup, even though Bill Gates was already worth millions when he and Melinda married. They did, however, prepare a separation agreement before going public with their divorce. While a prenuptial agreement is a contract made before the marriage, a separation agreement is a sub-category of postnuptial agreements made after the marriage is already in place, and what is commonly prepared for divorces. The contents of their separation agreement have not been made public, but Grimes has insight into how the agreement may play out.
The state of Washington, where the Gates filed the divorce action, is one of the rare community property states remaining in the U.S., but that still does not mean that everything either party owns is considered community property. For example, Washington has separate property exceptions to the community property law for property owned prior to the marriage.
According to Grimes, the old concept of “community property” that you see in the movies, where you receive half of everything in a divorce no matter when it was acquired, has been changed by many exceptions to community property laws in most states.
Community property in general means that all property is considered to be marital property, regardless of whose name is on the title or account or when it was acquired as long as it exists at the end of the marriage. This concept is the opposite of “equitable distribution” states like Virginia, in which pre-marital property is separate property and only property acquired during the marriage is marital property (although title on marital property is not dispositive of marital ownership). \
So, the question now is: Is all of Microsoft Bill Gates’ separate property?
Grimes says the separation agreement likely holds the answer to that question. If there was no separation and property agreement, it would have been an interesting question s since Microsoft was founded and successful prior to their marriage. Would the increase in value of Microsoft during the marriage be considered marital? What about stock splits that occurred during the marriage? Would building the company be considered extraordinary efforts by Bill Gates? All very interesting questions which apparently they have resolved by agreement.
Will the Gates’ divorce rival the Bezos’ split?
In terms of money, yes. The Gates also gave a significant portion of their assets to charity and causes (as did the Bezos’), but apparently, the Bezos’ had more money left over after the charity contributions.
What’s different in these high-net-worth divorces?
The difference in high-net-worth cases versus those with more standard assets (house, retirement, bank accounts) is the complexity of dividing the assets, the tax implications, and the non-liquid nature of assets such as companies. Any divorce in which an ongoing business is involved faces the issue of how to divide that company up and give each party a share. Non-liquid assets cannot be easily divided.
Most small business owners do not have other assets to trade for shares in the business. The Gates, however, have plenty of assets to trade. Microsoft is also a publicly traded company, so it is a matter of transferring stock between the parties.
The Gates’ are divorcing after 27 years of marriage. Has there been an increase in divorces after long marriages?
The number of older couples splitting after long marriages has increased, as more than 25% of people getting divorces in the U.S are over 50. Though there is not a clear-cut answer on why so many wealthy couples divorce after long, seemingly happy marriages, Grimes believes there are many factors at play.
One major factor is that people are living longer and may want to reinvent themselves, finding independence from their partners. There is also a lot less stigma around divorcing later in life, versus divorcing at 25. The kids are out of the house and divorce is much less frowned upon than it was in the 80s or even the early 2000s. Older couples also have money in savings so are less likely to have to rely on dual incomes to survive.
Ms. Grimes recommends that every couple (yes, even if you aren’t a billionaire) have a prenuptial agreement in place, especially for second or third marriages. While you may not plan on using it, it is best to have an agreement in place while things are going well in your marriage rather than trying to hash things out while emotions are raging. The last thing you want is for your resentful ex to take the majority of your retirement savings, leaving you unable to retire until you’re 90.
For more information on how age or having a high net worth can affect either party in a divorce, please contact Carolyn Grimes.
Whether you are facing a family law, protective order, estate planning, bankruptcy and/or criminal-law-related issue, Wade Grimes Friedman Meinken & Leischner PLLC is here for you during challenging times.